Busting the Peak Car Myth

We’ve heard the story about millennials. They’re hopelessly entitled, they never put down their iPhones, they can’t stop taking selfies with their dogs, and most importantly, they’re so busy with Uber and car sharing that they’re never going to buy their own set of wheels. Right?

New research is showing that millennials are in fact leaving urban areas and buying houses and cars in the suburbs at a rapid rate.

Slowly but surely, new reports are chipping away at the belief that millennials are the first American generation with a preference not to own a car. Some claim that millennials just aren’t interested in driving. The other possibility is that, until recently, they’ve simply been too broke to afford it. Furthermore, new research is showing that millennials are in fact leaving urban areas and buying houses and cars in the suburbs at a rapid rate.

Nevertheless, the popular myth that America’s younger generations are categorically rejecting the automobile enables analysts and policymakers to assume that the United States’ astronomical petroleum consumption is a problem that will resolve itself. Taking a critical look at this belief, therefore, is crucial if the national dialogue is to maintain perspective on the problem of oil dependence, and the necessary solutions.

A widespread assumption

For a few years, the media narrative was unambiguous. In 2013, TIME magazine dubbed Generation Y as “Generation Neutral” for its apparent apathy toward automobile ownership. It reported that fewer and fewer Americans under the age of 30 are obtaining a driver’s license, and concluded that many Millennials “hate the car buying process,” instead preferring urban living and online socializing, both of which reduce the need to own a vehicle.

The Atlantic took matters a step further, dubbing millennials “the cheapest generation,” and arguing they “have turned against both cars and houses in dramatic and historic fashion.” The Detroit Free Press reported that in a sample of unlicensed Americans between the ages of 18 to 39, 21 percent reported that they would never get a license. Fast Company’s conclusions were the same, noting that between 2007 and 2011, the number of cars purchased by people aged 18 to 34 fell by almost 30 percent. Furthermore, while earlier generations would typically race to the DMV to get their drivers’ license on their 16th birthday, now only 44 percent of teens obtain a driver’s license within the first year of becoming eligible, and only half are licensed before turning 18.

The conclusion was always the same: Millennials just don’t have a passion for driving, or at least not enough to justify spending a significant portion of their incomes on owning an automobile.

Too apathetic, too poor, or just waiting for the right time?

All along, car companies have pushed back against this belief. They argued that the disappointing sales figures were not a function of culture aversion to cars, but rather of younger people simply not being able to afford to drive. They might have been right all along.

Over 80 percent of those who don’t drive are likely not doing so because they simply can’t afford a vehicle.

A few years ago, researchers Brandon Schoettle and Michael Sivak of the University of Michigan’s Transportation Research Institute tried to puncture the narrative about millennials and cars. They surveyed people between the ages of 18 and 39 who do not have a driver’s license, and found that economic factors were the single biggest reason the survey respondents were unlicensed. Perhaps most telling was the fact that only 18.8 percent had full-time employment.

Among those surveyed, over 45 percent were unemployed, 20 percent were students, and 15 percent were employed only part-time. The researchers concluded that over 80 percent of those who don’t drive are likely not doing so because they simply can’t afford a vehicle.

Young adults without a driver’s license tend to have less education and higher unemployment than their licensed peers.

Good news for carmakers: Only 21 percent of currently unlicensed young adults don’t plan to get one in the future, while nearly 70 percent plan to get one within the next five years. Schoettle and Sivak’s research also found that young adults without a driver’s license tend to have less education and higher unemployment than their licensed peers. It seems reasonable to speculate, therefore, that if those individuals emerge from unemployment or underemployment, many of them may eventually become car owners.

It’s beginning to look like Schoettle and Sivak were ahead of the curve, as more and more surveys and other data sources are corroborating the assessment that millennials, far from rejecting car ownership, have been simply delaying it until their economic circumstances improve.

The media is listening. Last month in The Atlantic, the same writer who determined that millennials were rejecting cars and houses in “historic” fashion backtracked after encountering industry data showing that millennials are now buying more cars than Generation X and represent the second largest car market segment after baby boomers. Another survey by AutoTrader.com concluded that millennials are very interested in buying and owning cars; they are simply very discerning about performance and value, and don’t want to invest in a car until they can afford it.

Census bureau data shows that millennials are actually moving to the suburbs faster than they are moving to the city.

Of course, one of the biggest indicators of car ownership is location, and media attention has tended to focus on 20 and 30-somethings who live in dense urban areas and can easily meet their transportation needs through other means. However, this is in fact a small subset of millennials. Perhaps counter-intuitively, most of the millennial generation is not college educated, and doesn’t live in a city. Ben Casselman points out on FiveThirtyEight that the latest Census bureau data shows that millennials are actually moving to the suburbs faster than they are moving to the city, while a recent survey covered in the Wall Street Journal reported that 66 percent of millennials would take the classic suburban house, with the associated green lawn and nice car, over a condo in the city.

Time will tell

So, are American driving patterns shifting downward? It’s important to recognize that there was a slight downturn in per-capita car ownership and vehicle miles travelled before the recession hit in 2008, suggesting that some more fundamental changes have been taking place. And culturally, many Americans simply no longer feel that their car is a reflection of their personal identity, as they did in the 1960s and 70s when car culture was at its peak, which could help explain why the “peak-car myth” grew so pervasive so quickly.

On the other hand, the downtick in driving demand that occurred before the recession coincided with the historic run-up in global oil prices that occurred between 2000 and 2010. Expensive fuel could have played an important role. Now, the question is where millennials will take their relationship with cars now that they’re back on their feet financially, and fuel prices are low.

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The Fuse is an energy news and analysis site supported by Securing America’s Future Energy. The views expressed here are those of individual contributors and do not necessarily represent the views of the organization.

Issues in Focus

Safety Standards for Crude-By-Rail Shipments

A series of accidents in North America in recent years have raised concerns regarding rail shipments of crude oil. Fatal accidents in Lynchburg, Virginia, Lac-Megantic, Quebec, Fayette County, West Virginia, and (most recently) Culbertson, Montana have prompted public outcry and regulatory scrutiny.

2014 saw an all-time record of 144 oil train incidents in the U.S.—up from just one in 2009—causing a total of more than $7 million in damage.

The spate of crude-by-rail accidents has emerged from the confluence of three factors. First is the massive increase in oil movements by rail, which has increased more than three-fold since 2010. Second is the inadequate safety features of DOT-111 cars, particularly those constructed prior to 2011, which account for roughly 70 percent of tank cars on U.S. railroads. Third is the high volatility of oil produced from the Bakken and other shale formations, which makes this crude more prone towards combustion.

Of these three, rail car safety standards is the factor over which regulators can exert the most control. After months of regulatory review, on May 1, 2015, the White House and the Department of Transportation unveiled the new safety standards. The announcement also coincided with new tank car standards in Canada—a critical move, since many crude by rail shipments cross the U.S.-Canadian border. In the words DOT, the new rule:

Since the rule was announced, Republicans in Congress sought to roll back the provision calling for an advanced breaking system, following concerns from the rail industry that such an upgrade would be unnecessary and could cost billions of dollars. The advanced braking systems are required to be in place by 2021.

Democrats in Congress have argued that the new rules are insufficient to mitigate the danger. Senator Maria Cantwell (D-WA) and Senator Tammy Baldwin (D-WI) both issued statements arguing that the rules were insufficient and the timelines for safety improvements were too long.

The current industry standard car, the CPC-1232, came into usage in October 2011. These cars have half inch thick shells (marginally thicker than the DOT-111 7/16 inch shells) and advanced valves that are more resilient in the event of an accident. However, these newer cars were involved in the derailments and explosions in Virginia and West Virginia within the past year, raising questions about the validity of replacing only the DOT-111s manufactured before 2011.

Before the rule was finalized, early reports indicated that the rule submitted to the White House by the Department of Transportation has proposed a two-stage phase-out of the current fleet of railcars, focusing first on the pre-2011 cars, then the current standard CPC-1232 cars. In the final rule, DOT mandated a more aggressive timeline for retrofitting the CPC-1232 cars, imposing a deadline of April 1, 2020 for non-jacketed cars.

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DataSpotlight

The recent oil production boom in the United States, while astounding, has created a misleading narrative that the United States is no longer dependent on oil imports. Reports of surging domestic production, calls for relaxation of the crude oil export ban, labels of “Saudi America,” and the recent collapse in oil prices have created a perception that the United States has more oil than it knows what to do with.

This view is misguided. While some forecasts project that the United States could become a self-sufficient oil producer within the next decade, this remains a distant prospect. According to the April 2015 Short Term Energy Outlook, total U.S. crude oil production averaged an estimated 9.3 million barrels per day in March, while total oil demand in the country is over 19 million barrels per day.

This graphic helps illustrate the regional variations in crude oil supply and demand. North America, Europe, and Asia all run significant production deficits, with the Middle East, Africa, Latin America, and Former Soviet Union are global engines of crude oil supply.